“We must do better” Trends in Development Assistance

Remarks by Angel Gurría, OECD Secretary-General

Tokyo, 4 April 2008

Good evening Ladies and Gentlemen,

I am here this evening, with Eckhard Deutscher, Chair of the OECD Development Assistance Committee (DAC), to present the preliminary figures on official development assistance (ODA) reported by the members of the OECD DAC for the 2007 calendar year. These figures provide a very important indication for policy makers and for the world at large about the volume of aid delivered by the members of the DAC, who still provide around 90 per cent of the world’s official development assistance.

This year’s numbers come at an important juncture: tomorrow the G8 Development Ministers will meet here in Tokyo, graciously hosted by Japan. And in the current global economic context, we must keep our attention actively focused on development assistance to the poorest; we cannot let domestic economic concerns, important as they are, deter us from meeting our development commitments.

This is because poverty is the ultimate systemic risk. It is the breeding ground for the proliferation of terrorism, armed conflict, environmental degradation, cross-border diseases and organised crime. Development co-operation is an important part of the solution to this global challenge, and it starts with development assistance.

2007 ODA performance

So, what do our latest figures show?

The positive side of the coin is that ODA, excluding debt relief, has continued to grow: by 2.4 per cent in 2007. There is no collapse of the aid effort comparable to what we saw in the 1990s. ODA is now $12 billion higher in real terms than it was in 2004. And the ODA/GNI ratio is now 0.28 per cent. Excluding debt relief, that is about 0.26 per cent, higher than it has ever been since the early 1990s.
The concerning news is that this upward trend is well below what it needs to be to meet existing targets, which call for an ODA/GNI ratio of some 0.35 per cent in 2010. Remember that even this figure is just half the famous UN target of 0.7 per cent.

The aggregate ODA figure fell by some 8.4 per cent. This is not a disappointment: we expected that. It reflects the winding up of the special debt relief efforts that have been causing the ODA numbers to appear higher for the last 2-3 years. We have called this the “debt relief bubble”: it was bound to burst and it largely has, falling from nearly USD 19 billion in 2006 to USD 8.7 billion in 2007 – and it will fall further in the coming years.

The debt relief effort of recent years has been a major achievement. We had reached a situation in which the only way in which the heavily indebted countries (the HIPCs) could pay their debts, including their debts to multilateral institutions, was for donors to give them more aid to do so.

While we can be pleased that we harnessed the political energy needed to deal with the problem of unsustainable debt – and I might add that Japan played an important role here – these artificial circles of aid and debt repayments had been distorting aid numbers and our ability to assess real resource transfers.

The special situations of Iraq and Nigeria further exacerbated this distortion.
So the real disappointment in the 2007 ODA performance is that the trend growth in ODA is way below what is needed to achieve the ODA targets for 2010 that the members of the DAC members set for themselves.

Meeting the Gleneagles and MDG targets for aid

You will recall that in 2005, the Heads of State of the G7 countries at Gleneagles set extremely ambitious targets for increasing ODA – to get from $80 billion in 2004 to $130 billion in 2010. The G7 countries were joined by others just a few months later at the 2005 UN Summit. In setting these targets, the Heads of State agreed that ODA would be a major public expenditure priority, growing faster than almost any other item of public spending.

We are talking here about an increase in ODA of a magnitude and in a time frame that has never been attempted before in the history of the aid effort.

Our Heads of State remain politically committed to these aid increases. And there is no doubt that the targets have helped to underpin the growth in underlying ODA that we have seen and will continue to see. But they imply concrete budget and programming actions on both donor and partner countries of a scope that still elude us.

And given the current global economic uncertainty, it is all the more important that this priority is actively maintained.

Making the scaling up of aid effective

The scaling up of ODA will take time, but it will also require increasing the capacity of developing countries to absorb this aid and put it to effective use. So we need to focus on the development cooperation partnerships and processes that are needed to make the real transfer of significant increases in aid feasible and productive. Leadership by development Ministers in donor countries will be crucial to the success of this process.

So what are the prospects that we will see the sharp upward shift in trend growth in ODA disbursements that will bring performance into line with promises?

At the OECD, we have just completed a new, comprehensive survey of donors’ future spending plans to 2010. The results will be published early in May. We need this forward-looking information so that finance ministers in developing countries who depend on aid can do the proper planning and budget management, and make the investments needed to reach the MDGs.
Our survey shows that many donors are starting to share information on their future spending plans with their major developing country partners. Improving the predictability of aid flows in this way is key. Working with the UN Secretary General and other heads of international development institutions, the OECD will be helping donors to go further in providing details of future spending intentions at the country level, so that scaled up aid can be used to the best effect.

This issue of aid predictability is a critical one, and it features strongly in the 2005 Paris Declaration on Aid Effectiveness that will be reviewed next September at the Third High Level Forum on Aid Effectiveness in Accra, Ghana. It will be very important at Accra to reach agreement on pushing for faster progress on aid predictability and a selected number of other key aid management issues that affect the ability to raise the trend rate of growth of ODA and reach the MDGs.

In recent years, there have been positive signs of progress, assisted by increased aid. The sharp growth in ODA to health and basic education has contributed to some notable results: the number of children dying before their fifth birthday has fallen below 10 million per year for the first time; and deaths from measles in Africa have fallen by 91% since 2000. In parallel, both donor and partner countries are making major efforts to improve the quality and effectiveness of ODA. Improved effectiveness is important not only to achieve development results, but also to maintain the public support needed if the promised increases in aid programmes are to be delivered.

Current aid projections

On aid projections for the coming years, I am sorry to report that donors’ plans do not currently show the rapid upturn needed to deliver an additional USD 50 billion of aid in 2010 compared to 2004 (or some USD 57 billion in 2007 dollars).

OECD countries have programmed only an additional USD 11 billion so far into their planned annual spending, on top of the extra USD 5 billion for country programmes that they delivered in 2005. To meet the commitments made in 2005 to substantially increase aid by 2010, we still see a shortfall of nearly USD 40 billion in 2007 dollars in planned spending, compared with donors’ own targets. If we are to come close to achieving these targets, we must act now.

Taking development co-operation forward

In the rapidly evolving global economy, the nature of development co-operation is also changing. In recent years, we have witnessed the emergence of new actors, new sources and new forms of co-operation. Several large emerging economies are becoming another important source of development co-operation.

The growing flows of aid from some of these countries to Africa are expanding the growth perspectives of the continent. In the coming decades, the role of emerging donors will increase considerably. It will be crucial to work with them to share best practices and keep the highest quality standards.

The OECD can make a unique contribution in this sense. Our growing engagement in developing countries reflects a new OECD. It reveals an Organisation that is responding to the recent transformations of the world economy and its emerging global challenges. We are becoming more global, more inclusive and consequently more relevant. In June 2007, the OECD initiated a two-tier process of enlargement and enhanced engagement with 10 new countries. We have already started accession talks with Chile, Estonia, Israel, the Russian Federation and Slovenia. In parallel, we are strengthening our co-operation with Brazil, China, India, Indonesia and South Africa with a view to possible membership. These strengthened ties will help us work more closely on a range of global challenges, including poverty reduction.

Conclusion

On the eve of the G8 Development Ministers, I urge Development Ministers, Heads of State and Finance Ministers to make good on their development assistance promises. Doing so will mean lifting millions more people out of poverty, saving countless lives, especially of children and women, and providing better education while respecting the environment for future generations.
I now give the floor to the Chair of the DAC, Eckhard Deutscher, to explain the 2007 aid figures to you in more detail. Thank you very much.